Zero net savings certificate borrowing in 4 years

For four consecutive fiscal years, the government has failed to secure any net borrowing from savings certificates, forcing greater reliance on bank borrowing to finance the budget deficit and tightening credit flow to the private sector.

According to Bangladesh Bank data, the government had targeted Tk32,000 crore in borrowing from savings certificates in the fiscal 2021-22 and managed net borrowing of Tk20,260 crore.

However, over the following four fiscal years, net borrowing turned negative each year, meaning repayments from maturities and premature encashments exceeded fresh sales.

In FY23, against a target of Tk35,000 crore, net sales stood at negative Tk3,295 crore.

In FY24, the target was reduced to Tk18,000 crore, but net sales fell further to negative Tk17,999 crore.

In FY25, despite a borrowing plan of Tk15,400 crore, net sales remained negative at Tk6,063 crore.

For FY26, the interim government has set a target of Tk12,500 crore from savings certificates. But in the first eight months of the fiscal year (July-February), net sales were already negative Tk555 crore.

This means the government had to repay Tk555 crore more than it raised through fresh certificate sales during the period.

Economists say the shortfall is forcing the government to depend more heavily on bank borrowing, which may crowd out private sector credit, affecting investment and employment.

Former Bangladesh Bank chief economist Mustafa K Mujeri told the Daily Sun that weak business and trade conditions have left the government with limited alternatives.

“Borrowing from the central bank by printing money fuels inflation, while excessive borrowing from commercial banks crowds out private entrepreneurs, affecting employment,” he said.

He stressed the need to revive business activity to increase tax revenue and support job creation.

Former World Bank lead economist Zahid Hussain said several factors were behind falling savings certificate sales.

“High inflation, a growing tendency for premature encashment, gradually declining interest rates reducing attractiveness, and a shift of large investors toward treasury bills and bonds have all contributed,” he said.

He added that banks are more willing to lend to the government because of the absence of default risk, while high non-performing loans have weakened banks’ capital positions and made them more cautious in approving new private loans.

He also emphasised the need for stronger fiscal planning and higher tax collection.

The urgency has grown amid a widening fiscal gap, with the country’s tax shortfall estimated at around Tk1 lakh crore. Economists warn that without reforms in tax administration, broadening the tax base and improving compliance, the deficit will continue to widen, undermining fiscal stability and long-term growth.

Rising dependence on bank borrowing

With limited inflows from savings certificates, the government has increasingly turned to the banking sector.

According to Bangladesh Bank, the government set a borrowing target of Tk1.04 lakh crore from banks for the current fiscal year.

However, it had already borrowed around Tk1.09 lakh crore in the first nine months (July-March), exceeding the full-year target. 

Of this, Tk78,049 crore came from commercial banks and Tk30,936 crore from Bangladesh Bank.

As of 9 April, total government borrowing from banks stood at Tk1.12 lakh crore.

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To contain inflation, the government is now trying to reduce borrowing from the central bank, as such borrowing effectively creates new money.

Central bank sources said total borrowing from the banking system fell to Tk93,784 crore by 22 April, with borrowing from Bangladesh Bank dropping sharply to Tk212 crore.

Measures to boost private sector credit

Private sector credit growth stood at 10.13% in July 2024 but began falling sharply after political changes in August.

Due to prolonged uncertainty and high interest rates, growth dropped to a historic low of 6.03% in January.

In its monetary policy for January-June 2026, Bangladesh Bank cited tight monetary policy, higher government borrowing and uncertainty over new investment as key reasons for the slowdown.

To revive lending and economic activity, Bangladesh Bank Governor Mostaqur Rahman recently said a stimulus package would soon be introduced to help reopen closed factories.

Central bank sources also said work is underway to create a special refinancing fund offering low-interest loans to revive idle industrial units and support employment. 

A committee is now deciding whether the fund will be financed by the government or Bangladesh Bank.